For years, Dave & Buster's (NASDAQ:PLAY) was one of the best restaurant stocks on the market. The stock more than tripled from its 2014 IPO to its peak last year as its formula of video games, casual dining, and sports proved to be a winner, delivering impressive same-store sales growth and separating it from much of the struggling casual dining industry.

However, since its peak last spring, the stock has lost nearly half of its value as comparable sales growth reversed and profit growth ground to a halt. In the fourth-quarter report that just came out, D&B said comparable sales plunged 5.9% and adjusted earnings per share slipped from $0.63 to $0.61 -- even though there was an extra week in the calendar. Clearly, something is wrong at the eat-ertainment chain. 

On the earnings call, CEO Steve King said the drop in comparable sales surprised the company as October comps in the last month of the third quarter had been modestly higher, and he noted that amusement trends were particularly weak. He blamed the usual suspects, saying that new amusement offerings were less compelling, the weather was bad in much of the country, and "competitive intrusion was higher than forecast." The company also said that casual gamers were visiting less. 

King said in order to return to growth the company needed to deliver new game content, improve its menu offerings, and speed of service. While it's usually not easy to pinpoint the factors that cause growth at restaurant chains to suddenly evaporate, there are a few regular causes.

A group of people toasting beers at Dave & Buster's.

Image source: Getty Images.

Competition on the rise

Management noted competitive factors a number of times on the earnings call. While the executives didn't name any specific rivals, Dave & Buster's model is being challenged on a number of fronts, even though it remains the biggest "eatertainment" chain on a national level and has the best-known brand name. In the past, the company has noted that Top Golf is a competitor and dine-in movie theaters, where you can order from a full restaurant menu, are also becoming more popular.  

At-home entertainment options are all constantly improving as more Americans join streaming services. And restaurant delivery is rapidly growing too, led by GrubHub. The company also acknowledged that cannibalization could be a factor, especially as it adds more locations in markets it's already operating in.

Consumer fatigue

Along with competition, consumer fatigue often saps growth from restaurant chains like Dave & Buster's. Customers tire of the same experience each time they visit a restaurant and crave new menu items or new games in the case of a chain like D&B. That's why both fast-food and casual-dining chains turn to limited time offers to drive traffic as their novelty helps attract customers and their scarcity encourages customers to visit the restaurant before the offer goes away. 

Management pointed to the quarter's lapping the release of Rock 'Em Sock 'Em Robots as one cause of the downturn in amusement, and it also said several times that customers did not respond well to the company's lineup of games and content. However, the management team has some changes planned to help rebuild momentum around the gaming platform.

The turnaround plan

Returning the amusement segment to growth is the company's top priority as CEO King called amusements "the primary reason for the business." The company plans to launch a proprietary virtual reality platform in the middle of this year, tapping the latest trend in gaming, and King said the first title would be connected to a "very well-known Hollywood film franchise." 

Food and beverage has been a weakness for several quarters for the casual dining chain, and the company plans to improve its food quality. It's introduced a new Angus burger and will soon launch new chicken and steak items. D&B is also focused on improving speed of service and has simplified and streamlined its menu. Its last restaurant-level strategic priority is reducing friction in the guest experience through technology and operational changes that should speed up and improve service.

Despite those initiatives, management still sees comparable sales falling by low- to mid-single digits this year. However, restaurants often go through such swoons only to return to growth a year later after adding new menu items and making other needed changes. BJ's Restaurants, for example, recently returned to same-store sales growth after several quarters of declines, thanks to improvements in food and service, and the stock popped on its latest report.

Dave & Buster's stock, meanwhile, recovered nearly all of its losses following the earnings report, a sign that investors haven't given up on it. The stock should be able to manage a similar turnaround for patient investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.